Personal loans in Australia
In Australia, as all over the world, a home loan is specifically designed for the purchase of property, while a personal loan can be used to make major purchases, including cars, or for other worthwhile expenditure, such as supporting a university student or paying for medical expenses.
How do personal loans in Australia work?
Two official bodies, the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulatory Authority (APRA), regulate the financial sector in Australia. Banks and non-bank lenders can offer a variety of personal loans in Australia that are subject to differing terms and conditions.
However, ASIC and APRA regulate the market to make sure borrowing is safe and charges are fair, which is good news for you if you’re thinking of applying for a personal loan in Australia.
Why do people use personal loans in Australia?
There are many reasons why you may want to apply for a personal loan; some of the most common uses for personal loans in Australia are as follows:
- Providing support for a student;
- Making home repairs;
- Buying a car.
Many personal loans can be linked with other financial products, such as transaction accounts, savings accounts and credit cards, which can give you a more flexible way of managing your finances.
While banks and other financial institutions usually have set rates and fees when it comes to personal loans, it’s often possible to negotiate these with your chosen lender, tailoring your personal loans to your circumstances.
What are the main features?
Each lender offers different products, and the best way to understand how these products work and what they offer is to look for specific features you’re interested in. For example, some financial institutions charge extra if you want to make extra repayments so you can pay your personal loan off earlier than you would have otherwise. If you want to be able to make extra repayments, look for a lender that doesn’t charge extra when you do so.
Some lenders permit interest-only payments for part or all of the loan term, which means smaller repayments for that period. However, this means you’ll still owe the same amount in principal at the end of the interest-only period as when you first took the loan out. Other lenders offer redraw facilities, whereby you can reclaim some of the overpayments you have made, but be aware they may also charge you for this feature.
There are also sometimes there are rules relating to the reason you are taking out a personal loan, so it’s best to check if this is the case with your preferred lender before applying.
What are the pros and cons of personal loans in Australia?
A personal loan offers additional funds to spend on important things, such as emergency home repairs or unexpected medical bills. It can also help you to support a college or university student or allow you lend money to a family member or friend in need who can’t take out a personal loan themselves.
As with any financial arrangement, make sure your repayments are affordable and will not cause you or your family any undue hardship. To this end, thoroughly review and compare your options before settling on a personal loan provider.